U.S. Pat. No. 3,850,856 describes the preparation of hydroxyl-terminated polymers of epihalohydrins, and in particular, epichlorohydrin, by cationic polymerization thereof in the presence of water or ethylene glycol in controlled amounts employing as a polymerization catalyst or initiator, a trialkyl oxonium salt of an HMF.sub.6 acid, wherein M is a Group V element selected from the group consisting of phosphorus, arsenic and antimony. Good results are obtained when epichlorohydrin was polymerized using triethyloxonium hexafluorophosphate (TEOP) as the cationic catalyst or initiator. At the end of the polymerization it is necessary to terminate polymerization and also to destroy the catalyst residue. This is normally done by treating the polymer with ammonium hydroxide. The use of ammonium hydroxide for this purpose causes several problems. One is the development of an undesirable yellow or amber color in the product. Another in a gelation problem when the polymer is reacted with an isocyanate to prepare an isocyanate-terminated prepolymer. A process to provide stable, colorless, transparent product is desired.